Elm Analytics - Automotive Supply Chain Risk Digest #112 - March 29 - April 4, 2019

EARNING DIP

Most US automakers' auto sales declined in March.

INDUSTRY DIRECTIONS

Chinese automakers are continuing to crank out electric vehicles, despite fewer subsidies. Motivation to get ahead of existing global brands is driving the surge.

Toyota has opened access to 24k patents that it holds on hybrid and electric vehicles. The automaker says they will grant royalty-free licenses on the patents and will also provide fee-based technical support.

LITIGATION

Ex-Nissan chairman Carlos Ghosn was rearrested in Tokyo this week on new financial misconduct charges. In a statement, Ghosn called the arrest "outrageous and arbitrary."

The National Highway Traffic Safety Administration is opening an investigation into 3m Hyundai and Kia vehicles after reviewing reports of more than 3k fires that injured over 100 people. The inquiry will cover the 2011-2014 Kia Optima and Sorento, the 2010-2015 Kia Soul, and the 2011-2014 Hyundai Sonata and Santa Fe.

Hyundai will recall around 20k Veloster cars in the US and Canada over engine fire risk. The issue can cause fuel to ignite in the engine cylinders prematurely.

Tesla will pay a $31k penalty to the EPA over federal hazardous waste violations at its Fremont, California factory. The EPA says that the automaker failed to comply with air emissions standards and management requirements for generators of hazardous wastes.

MERGERS, VENTURES, ACQUISITIONS

Cooper Standard completed the divestiture of its anti-vibration systems business to Continental. 

Mitsubishi Chemicals has acquired India-based plastics supplier Welset Plast Extrusions. They will build a new plastic interior components facility scheduled to start production by the end of March 2020.

Bridgestone has completed its acquisition of TomTom Telematics.

Lear Corporation is acquiring automotive software maker Xevo for $320m. Xevo offers platforms for creating mobile apps and in-car content to connect drivers with food, parking, gas, hotel, and retail spots.

PLANT CLOSING

In response to the planned closure of the UK's Honda Swindon plant, the government has set up a £16m fund to help supply chains and automotive suppliers.

PLANT OPENING

Flex-N-Gate subsidiary Ventra Evart is opening a new facility in Evart, Michigan near its existing facility. The company will invest $3.75m into the 138k sf facility and employ about 50 people.

Daimler opened a new Mercedes-Benz assembly plant in Esipovo, Russia this week. The plant will make about 25k cars a year and employ nearly 1k people.

China's Shandong Linglong Tire has begun construction of a new factory in Zrenjanin, Serbia.

REGULATION

Automotive suppliers are preparing for the threat of a border closure between Mexico and the US.

Reassignment of Customs and Border Protection officials pushed average wait times to 5h at the US-Mexico border.

A May 18th deadline for the US administration's response to a probe is uniting the auto industry in opposition of import tariffs.

RISK ANALYTICS

CAR's Kristin Dziczek in USA Today:

"Given there are already signs of potential weakening in the economy, a total shutdown of the goods trade at the U.S.-Mexico border could push the United States into that recession that many economists have been warning us is on the horizon."

WTO chief economist Robert Koopman:

"U.S.-China trade is about 3 percent of global trade. Automobile trade globally is about 8 percent of global trade.

So you can imagine that the impact of automobile tariffs is going to be bigger than the impact of the U.S.-China trade conflict.

I think it’s pretty clear that any automobile tariff would likely have bigger knock-on effects through the global economy than what we see from the U.S.-China conflict."